CONSUMER PRICE INDEX

CPI is a measure that examines the weighted average of prices of a basket of consumer goods and
services such as transportation , food and medical care. It can be measured by different approaches (
LAYSPERES AND PAACHE).

The Pakistan Bureau of Statistics computes three main indices

Consumer price index.

Sensitive price index.
Wholesale price index.

CPI is the most used index to measure general inflation. The CPI expresses the current prices of basket
of goods and services in terms of the prices during the same period in a previous year to show the effect
of inflation on purchasing power. The CPI was first computed with 1948-49 as a base for industrial
workers in Lahore, Karachi & Sialkot only. However continuous efforts were made to make CPI more
common across Pakistan by including more items, cities and markets. In the past CPI was computed with
1959-60, 1969-70, 1975-76, 1980-81 and 2000-01 as base years.

At present 2007-08 is used as a base year to calculate CPI.

CITIES & MARKETS

CPI is now becoming a common measure of inflation across Pakistan and currently CPI is being widely
used across 40 cities. The number of markets that are selected depend on the size of each city. Around
13 markets have been selected from where the prices are collected. It is important to know that markets
are not just selected randomly, they are chosen based on their sales volume.

The table below shows the number of markets covered across 40 cities. There are a total of 76 markets.

Serial Number Name of City Number of Serial number Name of city Number of
markets markets
1 Rawalpindi 6 21 Karachi 13
2 Islamabad 4 22 Hyderabad 4
3 Attock 1 23 Nawab sha 1
4 Jhelum 1 24 Mirpur khaas 1
5 Lahore 7 25 Mithi 1
6 Sahiwal 1 26 Sukkur 2
7 Gujrawala 1 27 Larkana 1
8 WaziraBaad 1 28 Dadu 1
9 Sialkot 1 29 Peshawar 3
10 Faislabad 2 30 Mardan 1
11 Jhang 1 31 Abotabad 1
12 Multan 3 32 Bannu 1
13 Muzafargar 1 33 D.I. Khan 1
14 D.G. Khan 1 34 Minfora 1
15 Vehari 1 35 Quetta 2
16 Sargoda 1 36 Turbat 1
17 Mian wali 1 37 Gawadar 1
18 Bhawal pur 1 38 Loralai 1
19 Bhawalnagar 1 39 Khuzdar 1
20 R.Y. Khan 1 40 Dera Murad 1
The total number of markets are 76

Furthermore the consumption pattern of an individual depends on their level of income. The income
range used in CPI with 2007-08 as base year is:

Q1- Upto Rs8000

Q2- Rs8001 to Rs 12000

Q3- Rs 12001 to Rs 18000

Q4- Rs 18001 to Rs 35000

Q5- Above 35000

Basket of Goods and services.

At present the CPI includes 487 items in the basket. The basket is set up according to the taste, habits
and customs of the people. The basket was developed through the family budget survey conducted in
2007-08. It comprises of 12 major groups.

Group Commodity Groups

Number
1 Food & Non Alcoholic beverages
2 Alcoholic beverage , Tobacco
3 Clothing and Footwear
4 Housing, water, electricity, Gas and other fuels
5 Furnishing and household equipment maintenance
6 Health
7 Transport
8 Communication
9 Recreation & culture
10 Education
11 Restaurants & hotels
12 Miscellaneous Goods and services

The prices used to calculate CPI are collected from retail stores and service establishments. PBS collects
the current prevailing prices in the markets rather the prices that have been fixed by manufacturers.
How the data is collected?

PBS have placed their members across 34 regional offices that collects data regularly on a monthly basis.
The members visit the shops and stores to collect prices of selected items. The work of these members
is supervised by a Statistical officer. Each regional office has one Statistical officer. The officer makes
sure that the price collectors are following his instructions. He visits the market randomly for checking
the prices to make sure the price collectors are doing their jobs in the right way. There are advanced
computer softwares which are use to enter the data. This software has a unique feature that allows us
to compare the results with previous months. The data collected about the price is further checked at
the headquarter to ensure its accuracy. Incase of any ambiguity, the issue isf forwarded to the price
reporting center.

The index is calculated by using the LASPERYRES FORMULA.

In = (Pn/Po) x wi x 100

wi

In= CPI for nth period

Pn- Current price

Po- Base year price

WI- Weight of the item in base period

SENSITIVE PRICE INDEX

Price sensitivity is the degree to which the price of a product affects consumers purchasing behaviors.
The Sensitive Price Index (SPI) is a weekly inflationary indicator that measures the change in the
cost of a fixed basket of goods and services purchased by the households in the country. SPI is
computed to assess the price movement of 53 essential commodities prevailing in 73 markets of 17
major cities of Pakistan at short interval of time (on weekly basis) to review the price situation in the
country.

Currently the SPI is being computed with the base year 2007-08. SPI is based on prices in 17 major
cities and a total of 53 markets as shown in the table below.
S.NO Name of City Number of markets
1 Islamabad 4
2 Rawalpindi 6
3 Gujrawala 1
4 Sialkot 1
5 Lahore 7
6 Faislabad 2
7 Sargodha 1
8 Multan 3
9 Bahawalpur 1
10 Karachi 13
11 Hyderabad 4
12 Sukkur 2
13 Larkana 1
14 Peshawar 3
15 Bannu 1
16 Quetta 2
17 Khuzdar 1
Total mkt- 53

The SPI is calculated for Goods that are used frequently. Mostly that are used on a daily bases. The
following items are included in SPI with base 2007-08

S.NO ITEM S.NO ITEM S.NO ITEM S.NO ITEM

1 Wheat 15 Fresh Milk 28 Tea 42 Energy saver
packet
2 flour 16 Powdered 29 Tea 43 Match box
milk(nido) (prepared)
3 Basmati rice 17 Curd 30 Cooked 44 Washing soap
beef
(plate)
4 Rice irri-6 18 Vegetable 31 Cooked 45 Bath soap
ghee(tin) dal (lifebuoy)
5 Masoor pulse 19 Vegetable 32 Cigarettes 46 Chicken farm
ghee(loose) k2
6 Mong pulse 20 Mustard oil 33 Long cloth 47 Gas charges
7 Mash pulse 21 Cooking oil 34 Lawn 48 LPG
8 Gram pulse 22 Potatoes 35 Georgette 49 Electric charges
9 Beef 23 Onions 36 Shirting 50 Petrol
10 Mutton 24 Tomatoes 37 Sandal 51 Diesel
gents
11 Eggs 25 Bananas 38 Sandal 52 Telephone
ladies
12 Plain bread 26 Salt 39 Chappal 53 Shampoo
13 Sugar 27 Red chillies 40 Kerosene
oil
14 Gur 28 Garlic 41 firewood

Weights are drawn the same way as that of CPI. They are drawn on the basis of family budget survey
2007-08. The weights for each group are combined by taking simple average of weights of 17 cities for
each item. Furthermore Prices are collected on a weekly basis. The field staff is responsible for
collecting the retail prices of SPI items by visiting the shops personally. The formula is used to compute
SPI is also LASPEYRES FORMULA.
 Name- SYED MOHSIN RAZA NAQVI

ID- 17p0013

CONSUMER PRICE INDEX AND SENSITIVE PRICE INDEX